Max Borders

Destroying Wealth: One Special Interest Group at a Time

This is an awesome lesson bout the political economy of lobbying.         

  

 

If you want even more excruciating detail about the vortex that is Washington, DC, check out Jonathan Rauch's book Government's End. When you think about the fact that lobbyists are non-productively bidding for one competitor to put another competitor out of business (by distorting the market through legislation), your understanding of the true magnitude of the waste just piles up like one steaming turd atop another. You'll never think about the right to redress grievances the same way again. (See also classics of Public Choice Theory.)

Limiting Government Through Incentives

Okay. I’m no economist. Nor am I an accountant. But the economist or accountant who comes up with the way to integrate the following concept might do wonders for reining in an ever-expanding Leviathan in Washington (and 50 little Leviathans, nation wide).

Here’s the basic idea: give government employees incentives at every level and in every department to reduce the amount of money they spend by giving them a percentage of the money they save in their paychecks. This, theoretically, would shrink government and allow government employees to get bonuses for being better stewards of our tax dollars—rather than simply looking for ways to keep growing. Sounds simple, right? 

Of course, real life is always more complicated. One problem with this idea is that you can always get your masters to raise the baseline. For example: if you told bureaucrats in The Department of Deadweight Loss that they would get 1 percent of the savings in the annual budget – distributed quarterly – then these folks would have an incentive to lobby the appropriate budget writers and legislators to raise the baseline for the following fiscal year. This would allow everyone to grow government while supposedly “saving money” from year to year – i.e. missing the point (and gaming the system). Therefore, you’d have to peg the baseline to something besides percentage savings in the annual budget. 

But to what? There may be an obvious answer. And this is where a bean counter or economist might be able to help. In any case, the basic idea is to incentivize those internal beneficiaries of government largesse to consume fewer resources. Hopefully, this post will spark something that smarter people can run with. 

(Note: Another problem is that budgets are determined by legislators. Might they also get an incentive to save/shrink?)

The Metaphors Talk

The Locke foundation has my socio-economic metaphors talk up here. If you prefer to read the whole paper, find that here. 

Politics and the "Transmutation of Means to Ends"

Here's an interesting post by Arnold Kling, who's commenting on a paper by Dan Klein. Basically these guys are thinking about why Progressives, Libertarians and Conservatives are disposed the way they are. Both make some really interesting points. First, because human beings are meaning-seeking creatures, progressives find meaning in the state, which symbolizes their aspirations for a kind of collective good. This is no less a cognitive shortcut than the conservatives' inclination to contract with a "spirit-lord," a term that made me chuckle. A quick, dirty and probably unfair characterization might be: leftists worship Government and conservatives worship God. 

When it comes to progressives, I'd want to include some discussion about an excessively pronounced inborn guilt/envy/indignation disposition, which I call the Stone Age Trinity and that I elaborate on here. (I'll return to this in a moment...)

But Kling's post (as well as this NY Times Magazine piece by Steven Pinker) reminds me of that little bit of meta-ethics philosopher W.V.O. Quine did when he was alive. Quine said that ethics was basically a "transmutation of means to ends" and had little else to say on matters of right and wrong. He was a philosophical naturalist to be sure. And Quine thought ethical dispositions usually amounted to cultural mores that had been transmitted, via nature or nurture, from a time when the means were critical to a people's survival or flourishing. For example, the natural consequences of sex with a sibling was increased likelihood of birth defects and harm to the clan. While that taboo exists today, we can imagine scenarios in which that risk would be close to zero (birth control, prophylactics, etc.) The basic idea is that the moral value, the taboo, (or whatever) is what gets turned into the object of moral reverence or of tabooization after running the gauntlet of life and the world--often in very different contexts. They are epiphenomena of learning how to survive in the real world. But the world changes and sometimes the moralisms hang around anyway.

Back to my point about the Stone Age Trinity: On the paleolithic steppe, it made much more economic sense - i.e. was "rational" - for members of a clan to engage in reciprocal altruism, which is a fancy way of saying to share and share alike. But this only works as a rule when a group is pretty small (less than about 150) and food stuffs rot in a couple of days. As populations grew, our market economies evolved and gains from trade could be realized across greater distances, share and share alike became a rule that worked less and less well. Trade generated more prosperity. But both the evolved instinct and the cultural moralisms of sharing have hung around. None of this is to say that sharing is BAD. But government bureaucracies engaged in forced "sharing" over a population of millions just doesn't work very well for a whole host of reasons--from the government failure a la public choice theory to concerns about competing values like individual liberty. While the instinct of sharing may be satisfied by sanctimony in the opinion pages or voting booth, it works better closer to home and community. Knowledge is local. And so, frankly, are the folks tethered to one's heart. But the means of surviving on the paleolithic steppe have been "transmuted" into a political end. That's why politics will not be without struggle for a very long time. And that's why I find it interesting that "social justice" is little more than cave man instincts with fancy verbiage woven around it.

In any case, these are just a couple points of confusion I'd toss into the mix as we try to unpack why people think the way they do politically.

(Addendum: Not to be too harsh, but one of the less interesting (but popular) theories about political disposition - from a couple of leftists - is summed up here. Weiler and Hetherington purport to measure and aggregate the degree to which people are "authoritarian"--which is an unfortunate and inapt term for one's propensity to be stark, simple-minded and Manichean (i.e. seeing the world in black and white or good and evil). They then compare the authoritarian scores to party affiliations and conclude that a) the country is more stratified today than it was a couple of decades ago and b) Republicans are way more "authoritarian". I'll leave this mostly for the reader to consider. But I'd say there are much richer theories out there about political dispositions than one that views the political landscape through such a monochrome filter as relative "authoritarian-ness". For two guys who claim to be on the Blue Team of Nuance, they seem pretty darned reductionist to me. (Social science as scientism rears its head again.))

Stakes for the Vampire

Post over at The Next Right - vampire hunting the public option.

Rats or Children?

I have a piece over at TCS, which you may enjoy. Here is a sliver:

We aren't rats. Nor are we children. But Congress and the Obama Administration seem to think so. From Cash-for-Clunkers to the idea that all Americans should be forced to buy health insurance, our leaders are moving away from stewardship of the Constitution to a rewards-and-punishments government. "Stimulus and response" meets "hope and change". It's for your own good. But the idea that they can subsidize and tax their way to utopia has its roots in a discredited theory from early 20th Century—the psychology of B. F. Skinner.

It's On: Power of the Poor Blog Contest

Okay, the Power of the Poor Blog Contest is on. Get all the details here. Judges include Marginal Revolution's Alex Tabarrok and Enterprise Africa!'s Karol Boudreaux.

The contest is based on the work of leading development economist Hernando de Soto. The prize money isn't big, but what else you gonna blog about?

Anyway, the question is:
"What institutions can enable the world’s poor to realize their power and achieve prosperity?"

Good luck. And check out the preview to the film below.

Mackeycare: Solid Healthcare Reform

Whole Foods CEO John Mackey covers most of the desperately needed reforms to US healthcare. Can't add much:

• Equalize the tax laws so that employer-provided health insurance and individually owned health insurance have the same tax benefits. Now employer health insurance benefits are fully tax deductible, but individual health insurance is not. This is unfair.

• Repeal all state laws which prevent insurance companies from competing across state lines. We should all have the legal right to purchase health insurance from any insurance company in any state and we should be able use that insurance wherever we live. Health insurance should be portable.

• Repeal government mandates regarding what insurance companies must cover. These mandates have increased the cost of health insurance by billions of dollars. What is insured and what is not insured should be determined by individual customer preferences and not through special-interest lobbying.

• Enact tort reform to end the ruinous lawsuits that force doctors to pay insurance costs of hundreds of thousands of dollars per year. These costs are passed back to us through much higher prices for health care.

• Make costs transparent so that consumers understand what health-care treatments cost. How many people know the total cost of their last doctor's visit and how that total breaks down? What other goods or services do we buy without knowing how much they will cost us?

• Enact Medicare reform. We need to face up to the actuarial fact that Medicare is heading towards bankruptcy and enact reforms that create greater patient empowerment, choice and responsibility.

• Finally, revise tax forms to make it easier for individuals to make a voluntary, tax-deductible donation to help the millions of people who have no insurance and aren't covered by Medicare, Medicaid or the State Children's Health Insurance Program.

Mackey also discusses the benefits of HSAs at length. This is the laundry list the Administration doesn't want you to consider. What Mackey doesn't have the space to discuss is why these reforms would make such a profound impact. 

Mencius, Where Have You Been All My Life?

Thanks to Michael Strong, I have discovered a great blog. 

Rules, Free Zones and Institutions

Typepad is about one more weird glitch away from my ditching it altogether. So, let me try to recreate a post I was working on that disappeared on me:

The long and short of it is this: Paul Romer's TED talk is up. 

Finally, there is someone out there giving a popular talk about the importance of rules, i.e. institutions. James Buchanan and Douglass North have both given us wonderful academic treatments of what is probably the most important lesson humanity will ever learn--institutions matter. But it is exciting to see Romer talk about this fundamental truth using this free-zone approach -- particularly with pragmatism in mind. Some thoughts:

• Special economic zones have worked in Hong Kong, Singapore, Dubai and social entrepreneurs are working on them elsewhere. 
• Polyarchy - distributed authority and divergent rulesets - give us more opportunities to learn what works, to get the institutions right via iteration, and for people to vote with their feet.
• What can we Americans re-learn from this kind of thinking as we seek rapidly to centralize?

Pay close attention to the concept of rules about rules (or metarules). One primary metarule would be to craft rules with a view to individual freedom and the rule of law, which is what the US Founders did. Anyway, check out the Romer talk. (If all this reads like so much gibberish, read the best primer on institutions extant, by Frederic Sautet.)